Oregonrain

The Bankruptcy Carve-Out Problem on Agency Deals

Ok...starting to get it. My understanding (and it is not deep) is that the bill in Congress (which allows for bk cram downs on mortgages) will only apply to debt taken on by the homeowner as part of the "original acquisition." Not sure if this is the case but in essence this means that all the refinancings were money was taken out or 2nds and 3rds would not be subject to the "hair cut." That might impact this analysis.

The Bankruptcy Carve-Out Problem on Agency Deals

Tyler is on a roll. I am not smart enough to understand a word of this. I will read it a few more times ...taking time to sound out some of the words.. but it likely makes a ton of sense.

Another Big Bank Failure: More Likely Than Not to Occur

I understand that Buffett has three "buckets" when he looks at making an investment. Yes, No and too complex.

I have done reasonably well in both shorting and then going long with WFC now and again. I think that the government overlay here makes these investments "too complex" at least for me.

There are a lot of people that believe as this writer does that the banks are still hiding lots of I think "garbage" would be the polite term on their balance sheets. So the risk of another large failure cannot be written off. However, I think that letting Lehman fail and the aftermath of that convinced a lot of government and policy types that the alternative of letting a big financial institution fail is just too scary right now. Crap they rescued GMAC..when not many people were looking. I do not see them letting another large one go anytime soon.

Countrywide Takeover By BoA Would Make Sense

Felix should disclose if he has a position in Countrywide. User138 does us a favor here.

I can only speculate on three things. First, as NoFate suggests the Fed is lurking here. It is hard to imagine that after getting burned the first time that BofA wants to double down without that kind of "backstop." But, who knows we have all seen large companies do really stupid things.

Two..maybe with their investment BofA got a really good look at the "muck" on the balance sheet and have convinced themselves that they know what is there and they know the "real value."

That is the only good scenario..well so long as they got it right. But in talking to many people about the sub-prime mess the one thing I hear from very knowledgeable people is that NO ONE can price these "assets" at this time. I do not know what would make BofA smarter than the type of people that thought this crap up....but who knows.

Another thought is that if BofA is not "too big to fail" now...it sure as heck will be after this acquisition. So its like being lost in the woods and gorging on poison toad stools in the hope that you will be so poisonous that no bear would ever eat you. So if you are the CEO and are worried you say to yourself...hey I know how to make it impossible for the Fed to let us go down....

Overall...it looks like rearranging the deck chairs and not much else.